Economics

Technical

Communities

- history, real life characters and events -

Stones, salt, shells, gold

Medium of exchange, unit of account, store of value

Not the first Blockchain

Not the first digital currency

1995

Surety

Cryptographic hash functions

The New York Times

DigiCash (1989)

Mondex (1993)

CyberCash (1994)

E-gold (1996)

Hashcash (1997)

B-Money (1998)

Bit Gold (1998)

Lucre (1999)

Paypal (1993), Alipay (2003), M-Pesa (2007)

Rely on some form of central authority

Peer-to-peer

Double-spending

Records:

- Economic Activity

- Financial Relationships

(Transactions)

(Debt)

Keeps:

- Transaction Records

- Balance Records

(Ethereum)

(Bitcoin)

(UTXO)

- Communication that needs to be protected (encryption)

- Computations that need to be verified (digital fingerprint)

Fundamental to blockchain technology.

Makes blockchains immutable and easily verifiable.

Resolves the double spend problem.

- Merkle Trees

- Digital Signatures

- Asymmetric Cryptography (Public Key Cryptography)

  (+ Addresses)

- Cryptographic Hash Functions

- Prove knowledge of a secret (digital signature)

The state of what we all agree to.

Rules without rulers.

Network-based rules.

Determines the validity of transactions and blocks.

Protocol rules

- Max 21 000 000 BTC

- Issuance rate. Halving every 210,000 blocks (~4 years)

6,25    BTC

2009:

50

2012:

25

2016:

12,5

2020:

~2137

...

BTC

BTC

BTC

E.g.:

Block Size

Block Header
 Previous Block Hash
 ...

Transaction Counter

Transactions

Block Size

Block Header
 Previous Block Hash
 ...

Transaction Counter

Transactions

Block Size

Block Header
 Previous Block Hash
 ...

Transaction Counter

Transactions

#630,000

...

Previous Block Hash

Previous Block Hash

Previous Block Hash

- Bitcoin Core
(the reference implementation)

- bcoin
- Bitcore
- BitcoinJS
...

(3rd Halving, May 2020)

Full /

Light-

weight

Mining

Network Routing

Wallet

Input

Hash

Cryptographic Hash Function

- Deterministic

- One-way

- Changing only one bit from the Input, changes the Hash completely

- Avoid Hash Collisions

- Speed. Fast, but not too fast

Intro to BTC!

SHA-256

11d8ec7d723a09c61e64de2e0f8ad92e2ed4e0f9742aece5cf15e237d3577674

Intro to ETH!

SHA-256

7adc629fe69b898aa5a4d3f094e26efb45ab092b500d712bd37de7a3647df515

Mempool

Unconfirmed

Transactions

Transactions

Block Size

Transaction Counter

Block Header

Nonce

#630,000

(3rd Halving, May 2020)

Block Header Hash   <   Target

Nonce

Number  Once

: 0, 1, 2, 3 ... 2³² (4,294,967,295)

Target: 0x17117a39

000000000000000000024bead8df69990852c202db0e0097c1a12ea637d7e96d

000000000000000000117A390000000000000000000000000000000000000000

Nonce: 2,302,182,970

Timestamp

Target

Merkle Root

Previous Block Hash

Version

=

...

Immutable

~ 100 000 000 TH / s

Transactions

Merkle Root

Block Header

Previous Block Hash

Block Header

Previous Block Hash

Block Header

There is more to gain by being part of the network

~ 100-200 000 000 kWh per day

> 10 000 Nodes

Has to re-validate Blocks

Attacker

Bitcoin Network

Modified Blockchain

51% attack

~10 min

Halving each 210,000 Blocks, or ~4 years

Stock / Flow

Appreciate when there is demand,

while production is constrained from inflating the supply

(existing production)

(annual production)

Gold:

- ~1.5% annual production

- high Stock to Flow ratio

Transparent and predictable

Copper

demand

price

production

price

imagination

exercise

Next:

Receive, Send & Hold Funds

Private

Key

Public

Key

Bitcoin

Address

Elliptic Curve Multiplication

Hashing Function

Asymmetric Cryptography

(Public Key Cryptography)

Addresses

Keys

Wallets

,

- manage Keys and Addresses

- keep track of funds

- create and sign transactions

Private Key:   1   ...   1.158*10⁷⁷-1 (~2²⁵⁶)

- Contain Keys,

not Coins

Open to all. Anybody can start participating

Android, iOS, Linux, Windows, Mac -

Hardware -

Deterministic, Nondeterministic -

could be generated randomly

(SHA256 & RIPEMD160)

A = RIPEMD160(SHA256(K))

K = k * G

1778qNWeJRtrqHAiYhM5gPMUbTXrV7X2bp

bc1qqqfhzxtu67fv70ftnhnqqd3ud4jfgkv0rj05ea

0.07783548

Flooding.

Confirmations:

0

(mempool)

1

(the last Block added to the Blockchain contains our Transaction)

2

(one Block added after the Block that contains our Transaction)

6

...

...

(irreversible)

3K9WWZEdBAbLgfeuNLeKW8XWGhTBoyfTn3

bc1qqqfhzxtu67fv70ftnhnqqd3ud4jfgkv0rj05ea

0.08331267

bc1quzkljdpv8y7jdj4sanqga3sh2tzlc4pdkhscsw

bc1qqqfhzxtu67fv70ftnhnqqd3ud4jfgkv0rj05ea

0.07131278

23,246,093

satoshis

0.14101432

33Qj37FtdPMEeL99vCHv35rKdtCMezEVUt

bc1qqqfhzxtu67fv70ftnhnqqd3ud4jfgkv0rj05ea

0.14101432

0.14914826

0.07783548

0.07131278

0.00807598

bc1qgaghyv0n993vvlcusec8tv9w92hl73a5lgxdg7

0.1490903

0.00005796

–

=

(Fees)

UTXOs - Unspent Transaction Outputs

BRD, Electrum, Mycelium, Eclair, ...

, Pen, Paper

Phone

BRD Wallet

+ Android & iOS

+ graphical interface

+ connects directly to a Node

12, 24 words Mnemonic Phrase

BIP39

(BIP - Bitcoin Improvement Proposals)

Wallets generate deterministic keys

2048 English words

2048¹² = 2¹³²   ,   2048²⁴ = 2²⁶⁴

– control over fees

+ Open source

+ Non-custodial